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457 Plan Termination


chris

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Is the termination of a 457 Plan much the same as the termination of a plan qualified under 401???

Also, can a 457 Plan be frozen, i.e., no more deferrals allowed, and the assets held in the plan distributed as per the terms of the plan???

Any help appreciated,

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Guest CVCalhoun

Actually, the freezing of a section 457 plan is clearly permitted under federal law. The only issue would be a Constitutional one: in many states, courts have held that you cannot eliminate an existing pension plan for existing employees, unless you provide a pension plan with at least as favorable benefits.

Distributing benefits would be more problematical. Section 457(d) provides that benefits are not to be distributed earlier than attainment of age 70½, separation from service, or unforeseeable emergency. No exception is provided for termination of the plan.

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Employee benefits legal resource site

[Note: This message has been edited by CVCalhoun]

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Re: termination or freeze of 457 Plan, clearly the plan sponsor could discontinue employees' deferrals and maintain the assets in the plan until a participant is entitled to distribution under one of the three circumstances set out in 457(d)(1). Is that a fair assessment??

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